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DXC Technology revenues dragged down by digital contract issues

Slowness with some digital contracts and issues in the maintenance business hurt Q2 numbers

A slower ramp up of a few large digital contracts was to blame for revenues slipping at DXC Technology with the firm missing its targets in its second quarter.

The firm took steps yesterday to make sure it was in a position to take a lead in the enterprise SaaS space with the acquisitions of ServiceNow specialists UK-based TESM and BusinessNow in the Nordics, but the latest results indicate that there is still work to be done on increasing digital skills in other areas.

"We saw delays in the ramp-up of a few large digital contracts. Now while we continue to see strong market demand for our digital solutions, it is taking us longer than expected to bring on resources to support the digital growth. Several clients were also behind and scaling their digital transformations; together these delays impacted revenue in the quarter by roughly a $100m. And to accelerate our higher, we're creating a dedicated digital hiring engine," DXC chairman, president and CEO Mike Lawrie told analysts.

"The second reason for our $200m revenue miss was the decline in our application maintenance and management business. This business missed expectations by roughly $80m. The miss was largely driven by reduction in application maintenance spend in several large accounts, particularly in the Americas, including HPE as these clients remix their IT investments," he added.

Revenues for the three months ended 30 September were $5.01bn, down by 8.1% compared to the year before, with pre-tax income coming in at $332m, up from $284m.

Lawrie told analysts that the latest acquisitions would add more weight to its digital transformation and cloud services offerings.

"BusinessNow and TESM which will further expand our industry leading ServiceNow practice. BusinessNow is a global end-to-end, the ServiceNow now partner and TESM is the largest independent ServiceNow partner in the Nordics. These acquisitions will further enable our clients to leverage ServiceNow as a foundation for enterprise wide digital transformation. And working together DXC and ServiceNow deliver a broad range of cloud-based as a service solutions that extend beyond IT service management to risk and compliance, as well as human capital management," he said.

The firm cut its forecasts for the full year as a result of $300m of currency headwinds.

Read more on Infrastructure-as-a-Service (IaaS)

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